General Question

isorabins's avatar

Why shouldnt I file for bankruptcy?

Asked by isorabins (50points) May 26th, 2008

Putting aside the morality question of whether or not I should pay off my debts, what are the downsides? It seems like you can start rebuilding your credit as soon as you file, so why not unload some debt?

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11 Answers

richardhenry's avatar

Although you say you can start “rebuilding your credit,” this really isn’t the case. Although your credit score may increase, bankruptcy on a credit history is almost a sure fire way to ensure that nobody allows you to borrow from them in the future. I would reconsider filing for bankruptcy unless you really have no other way out, and be sure to have a long conversation with your financial advisor.

sndfreQ's avatar

I’ll echo richardhenry’s advice and add:

Stateside, the filing will stay on your credit history for a minimum of 7 years (and up to 10 years); if you’re credit is very bad, filing may actually incrase your credit score, but the filing will have long-lasting implications as to applying for new credit, loans, and anything that references your credit file (moving to a new apartment, for example).

There are a lot of articles on the internet that may offer alternative solutions and additional information…here’s one

btw, a lot of those sites are also trying to solicit their services (beware)...good luck.

@RH-nice work this evening :) thanks for the nice compliment in the other thread

DeezerQueue's avatar

Bankruptcy should be your last resort. Debt consolidation may be a better option, unless your debts are absolutely insurmountable.

How long a bankruptcy will remain on your credit history varies from state to state. While some lenders or creditors may in the future give credit to you based on the fact that after a bankruptcy you are debt free, it may well be that you end up repeating the spending pattern that got you there in the first place.

Your main goal should be to find out why and how you accumulated such a large amount of debt and what you can do to change your spending habits, including therapy if it’s necessary.

hearkat's avatar

They don’t allow anyone to declare bankruptcy just to unload debt… You have to prove that you are incapable of paying those debts. Also, the laws changed a couple years back, so now your retirement savings are considered assets.

Most bankruptcy lawyers will offer a free consultation to review your case and see if you are likely to qualify. If you choose to proceed, the lawyer requires cash payment up front.

DeezerQueue's avatar

hearkat is right as well, filing a bankruptcy is not cheap, either.

jkwells1's avatar

I filed back in 2001 when the penalties were not as bad, meaning you could get rid of mostly everyting but student loans. I read that not there are some things that your not able to write off, I would consult a lawyer to assess you situation. I recall paying a lawyer $200 just to file. He specifically mentioned that he would not represent me in court for tha fee. It was a little weird showing up at court by myself, but in the end it all worked out okay. As for what it does to your credit, it all depends on different factors. for example, I had been paying my credit cards until the very last few months. So I was able to rebound and I am guessing that my credit score must of improved as I was offered a 5K and 10K Credit Cards within a year or less after Filing for bankruptcy. I have since gotten married and when we applied to a loan for our current house both my wife, who also filed, were approved. This might have been because of all these companies prior to the real estate crash. At any rate good luck in your adventure. I would talk to or try to get a hold of someone who filed within the last year and ask them what they have experienced. Cheers!

Zaku's avatar

Depends on how much you owe and in what way, and what kind of assets you have. Find a bankruptcy lawyer whom you like to consult with about the decision.

I do not think that one bankruptcy actually has much negative impact on the ability to get future loans, credit cards, or to move to an apartment. Much worse in practically all ways is being stuck struggling to pay off credit cards (if that were the situation).

Response moderated
jkwells1's avatar

Just to follow up… I really think that the only reason why my wife and I got a loan after both having had bankruptcies in our past was mostly due to the predatory lending that was the norm 2–3 years ago. Today it is so difficult to get a loan unless you put up 10 to 25 percent down first. We have been paying our mortgage for 3 years now and have to to find someone that will lend us or allow us to bring down our interest and lower our monthly payment while consolidating our loans. And we have never missed a payment or been late on a payment. So good Luck Still!

jvgr's avatar

Not having lived in the US for quite a while:
Are you allowed to keep any assets when you file, or is it a state issue that varies.?

Zaku's avatar

@jvgr – Yes, you can keep quite a bit. Very generally, if it’s not something easily converted into a bunch of money, the filer keeps it.

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